Japan Business Sentiment Weakens In Q1

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Japan's business confidence deteriorated in the first quarter on stronger yen and fears of trade war, a closely watched survey showed Monday.

The business confidence index among large manufacturers dropped to 24 in March from 26 in December, the quarterly Tankan survey released by the Bank of Japan revealed. This was the first fall in two years. The score was seen at 25.

Similarly, the indicator for non-manufacturers slid 2 points to 23 in March. The score was expected to fall marginally to 24.

The outlook for both large manufacturers and non-manufacturers declined to 20 in the first quarter.

Nonetheless, large companies plan to lift their investment by 2.3 percent in the fiscal year 2018. Large manufacturers expect the yen to trade at 109.66 against the US dollar during the period.

The survey was conducted among 10,020 firms between February 26 and March 30.

The quarterly change in business conditions across all firms tends to be a good guide to GDP growth, Marcel Thieliant, an economist at Capital Economics, said.

On that basis, the one-point rise last quarter suggests that GDP growth will slow to around 1.5 percent last quarter from the rapid 2.1 percent in the fourth quarter, the economist added.